February 02, 2011

What do the events in Egypt mean for business?

Many have been astonished to see first Tunisia, and now Egypt, ride the modern wave of global interconnectedness into a new awakening of community. What do these events mean for business?

Some analysts have focused on the volatility in the price of oil and the potential for political unrest if extremist movements gain a foothold in the Middle East.

More discerning observers detect a deeper message for the managements of all large organizations, both political and business. The message is simple: imperial administrations are an endangered species.

What kills imperial administrations: economics

The process of rooting out imperial administrations in the political sphere has been under way for centuries, as far back as Magna Carta in England in 1215, the Revolution in France in 1789, and on to the fall of the Berlin Wall in 1989. What eventually brings them down is not simply the people’s unquenchable love of freedom, but rather economics. It’s the inability of these administrations to deliver the economic results necessary to keep them in power.

Imperial administrations can create an outward semblance of prospering, even for extraordinarily long periods, but meanwhile the economics is eating away at the foundations. Imperial administrations lack the agility to cope with an increasingly complex, rapidly changing world. Frustration builds. Then some event sparks the collective consciousness and the intolerability of the situation becomes apparent to all. Abruptly, the imperial administration collapses like a punctured balloon.

Thus for decades, I gazed at the vast and somber edifice of the Soviet Union. Grim, impregnable, and despotic, it seemed as though it would last forever. Yet economically—unperceived by many—it was rotting from within. When the Berlin Wall came down, the edifice abruptly collapsed.

For decades, imperial administrations in the Arab world also appeared to be impregnable. Then the self-immolation by Tunisian street vendor who had his vegetable cart confiscated by the government sparked a national uprising of all the others who were frustrated. Egypt quickly followed, while Jordan, Yemen, Syria and Saudi Arabia now wait nervously in the wings for their turn.

The advent of social media has made the situation infinitely more combustible and accelerated the pace of change. What used to happen in decades and centuries is now happening in days and weeks. Suddenly people can communicate and organize horizontally on a mass scale. There is little that even powerful dictators can do to prevent it.

Imperial administrations in business

Meanwhile imperial administrations in business still stand. These vast and somber edifices also have an outward semblance of flourishing, even registering record profits. Like the political dictatorships, they appear impregnable and even give the appearance of being destined to last forever.

Yet like the political dictatorships, they are rotting from within. The return on the assets of U.S. firms is only a quarter of what it was in 1965. The life expectancy of firms in the Fortune 500 is already startlingly brief—now less than fifteen years and heading towards five years, unless something changes. Executive turnover is accelerating. Only one in five workers is fully engaged in his or her work. Firms older than five years contributed zero net new jobs for the U.S. economy in the period from 1980 to 2005. By and large, the private sector is no longer providing a good livelihood for all the country’s citizens. Frustration is building.[i]

The top-down command-and-control management practices that are causing the decline are anachronisms from a former era. They are incapable of coping with the complex rapidly shifting marketplace of today. It is only a matter of time before they come to be seen as uneconomic and intolerable as dictatorships in the political sphere. Once again, it is the economics that will drive the change.

Just as in politics, the heads of imperial administrations in business often claim that the only alternative to their rule is anarchy. Yet just as in politics there is the alternative of democracy, so in business there is an alternative to anarchy—a different kind of management that focuses on delighting its customers with continuous innovation and draws on the full talents of those doing the work.

Mastering the art of continuous innovation

The exemplars of this reinvented management—firms such as Apple, Amazon and Procter & Gamble—are showing the way. They have mastered the art of continuous innovation.

As The Power of Pull points out, these firms proceed “by setting things up in short, consecutive waves of effort, iterations that foster deep, trust-based relationships among the participants… Knowledge begins to flow and the team begins to learn, innovate and perform better and faster.”

The stock market is already recognizing the gains that are made when firms get into the new mode. Look for example at the extraordinary gains in the ten-year stock price of firms like Apple [AAPL] and Amazon [AMZN], with increments of ten to fifteen times, compared to the imperial stalwarts like Walmart [WMT] and GE [GE] that struggle even to stop losing value.

The revolution will also be accelerated by the decisions of talented young people who are not willing to spend their lives in these command-and-control bureaucracies . They are voting with their feet and opting to work elsewhere. As Umair Haque shows in The New Capitalist Manifesto, they prefer to work for organizations that create meaningful work and thick value for society.

Thus in business the revolution is happening, not through demonstrations in the streets, but more quietly in decisions by investors and by the talent that business needs. As a result, the days of these imperial bureaucracies are already numbered.

The events in Egypt and Tunisia are thus part of a larger story, an emerging process of societal change, in which imperial structures everywhere are being replaced by arrangements that enhance rather than strangle the living part of people’s lives.

Comments

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Excellent article!!!

Even though the very personal events and experiences are shaping us personally we are embedded in a larger carpet of movement.

Sensing the shift in emergence and talking about it via various communication streams, is what brings people together to get in action.

Glad to be part of it in the moment. Almost 10 years as part of a flood crisis.

... great and disrupting times are closely ahead of us, we as individuals and communities (whether in business or society in general) will have to adapt or otherwise we are doomed to fail. Collective action and knowledge will count more than in the past.

Yes. Quite the natural progression, for those that have seen the power of self-organization at work. Wonderfully inspiring case studies at http://worldblu.com
See also Wave Riders by Harrison Owen, the finder of open space technology that grew into the unconference format.

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